Property prices begins to move south - says Makaan.com Property Index (MPI)

Makaan.com Property Index – National

Property transactions in major Indian cities were down by 20-40% for the past 6-8 months owing to high property prices & home loan interest rates. Buyers adopted a wait and watch approach. With unsold inventory piling up in all major cities, it was widely expected that property prices will come down. The latest release of Makaan.com Property Index (MPI) confirms this trend with property prices in some Indian cities starting to move south-wards.

As per the October 2011 MPI released today, the national index stood at 1483 compared with 1495 in the corresponding month last quarter, this is a drop of 0.8%. The fall in national index is attributed to the softening of property prices in key cities like Hyderabad, Bangalore, Mumbai & Ahmedabad, which fell by 21.6%, 7.8%, 5.6% and 2.8% respectively over the last three months. Giving support to the index were the property price movements in cities of Kolkata, Pune, Chennai and Delhi NCR that rose by 17.4%, 12.4%, 9.1% and 4.2% respectively over the last three months.

The abnormal fall in Hyderabad can be attributed to the ongoing agitation for a separate state of Talengana which is hampering the real estate activity in the city. The fall in other cities seems to be on account of low transaction & high unsold inventory. It will be interesting to note if this is just a short term price correction or the prices will continue to move southwards even in the coming months. Whatever said and done it is a good news for the home buyers who stand to be the ultimate beneficiary.

On an annualized basis, the property index of all the main cities continue to show a positive trend. If one looks at the year on year trend and compare the property prices of October 2011 Vs October 2010, we observe that the national index have appreciated by 26.8%. Giving support to the national index are price appreciation in Pune (38.8%), Bangalore (33.1%), Delhi NCR (25%), Mumbai (20.2%), Ahmedabad (19.7%), Hyderabad (16.1%) and Kolkata (11.7%).

Makaan.com Property Index – City level

Commenting on the findings Aditya Verma, EVP & COO, Makaan.com says, “Indian market is undergoing a short term correction in property prices which is actually healthy for the market. This will lead to some revival of buying interest. We expect the prices to remain range bound over the medium term (6-9 months). A meaningful revival is expected only by July-Sept 2012 when price correction will be additionally supported by softening of home loan rates.”

Makaan.com Property Index (MPI) is part of the knowledge division of Makaan.com called MakaanIQ that has been bringing out property intelligence & research reports for the benefit of homebuyers and real estate industry. MakaanIQ was the first to predict a shift towards affordable housing in first half of 2008. The Index is another attempt at bringing objective information and analysis for the benefit of the Industry and the country. This index is based on minimum database size of 20,000 data points every month and the analysis has been drawn over a period starting Jan’09. The complex algorithm takes into account the property prices as base and then factors in the demand and supply of residential properties for each of the cities covered by it. Care has been taken to give weight age to cities in line with the size of underlying property market. The prices of properties were obtained across micro-markets through property listings on the website as well as Makaan.com’s nationwide sales force.